Sales, however, have gone up to Rs 241.26 crore, from Rs 154 crores the previous year, according to a release. Depreciation stood at Rs 23.96 crore for the year ended March 31, 1999.

The inordinate delay in environmental clearance for the company's pulp plant (now received) by the Tamil Nadu government has also contributed to SIV's declining fortunes, industry sources said. Unable to cope with poor offtake, the two players in the VSF industry, Grasim Industries and SIV Industries, have been drastically cutting down production for some time now.

The companies' combined output has come down to 12,078 tonnes in February 1999, from 13,026 tonnes in November 1998. The situation has become so dire that unsold stocks in the industry total 9,499 tonnes (equivalent to 28 days ofproduction), the sources said.

Production in January 1999 was 13,718 tonnes, with stocks piling up to 10,298 tonnes. The industry's production for the period between April and December 1998 was around 137,565 tonnes, much below the capacity of 305,000 tonnes, the sources added.

The demand decline has been caused by a steep rise in imports from south-east Asia. Despite offering discounts, the threat from imports is still affecting the industry. In spite of hectic lobbying by domestic manufacturers, the budget failed to provide any relief to the industry, the sources said.

While increasing imports have been affecting domestic VSF demand to a large extent, preference for polyester staple fibre (PSF) due to relatively lower prices has also contributed to the recent glut. PSF prices are ruling at Rs 41 per kg, against a higher VSF price of Rs 64 per kg.